Proposed State Budget Jeopardizes Health Coverage for More Than 500,000 Children
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Governor Schwarzenegger’s 2008/2009 budget proposal undercuts his commitments to reform the state health care system and to provide health insurance for all California children. It simply makes no sense for California to adopt a budget that puts children’s health at risk, wastes taxpayers’ money, and forfeits substantial federal funding for health care in our state. These proposals would result in over 500,000 children losing health coverage, increasing the number of uninsured children by 70%. Health coverage improves children’s overall health and opportunity to succeed. Children’s coverage also impacts the state’s bottom line: a recent study of nine California counties with Children’s Health Initiatives showed a 25% decline in preventable hospitalizations among low-income children, adding up to $7.35 million in taxpayer savings. 1 If all low-income children had health insurance, the state could save $24.3 million per year in the cost of preventable hospitalizations. 2
Gloomy Forecast for Children’s Coverage in the Governor's Budget Severely Cutting Children's Health Funding and Forfeiting Federal Funds
The chart below estimates the impact of the Governor’s budget – cutting more than $430 million from children’s health insurance programs and relinquishing over $800 million in available federal funding.
Governor's Budget Severely Cuts Children's Health Funding and Forfeits Significant Federal Funds
2008/2009 FY ($ Millions) General Fund Cuts Forfeited Federal Funds Estimated Total Cuts Affecting Children's Coverage Quarterly Medi-Cal County HFP HFP Plan HFP CoStatus Provider Administrative Premium Rate payments Reports* Rate Cuts* Cuts* Increases Cuts -92.2 -92.2 -602.4 -602.4 -75.8 -66.4 -11.1 -20.2 -3.4 -6.2 -22.4 -40.7 HFP Dental Cap -6.3 -11.4 No County SB 437 Outreach Reforms Grants 13.1 13.3
Totals
-800.5 -826.2
-40.6
-265.1
-31.3
-31.3
-9.6
-63.1
-17.7
-
26.4
-432.2
* These proposals also impact parents and other adults in Medi-Cal; approximately 22% of all Medi-Cal costs can be attributed to children (see California HealthCare Foundation, Medi-Cal Budget and Cost Drivers). Estimated Total Cuts Affecting Children's Coverage includes 22% of the costs for those items.
Quarterly Status Reporting in Medi-Cal Adding Red Tape and Causing 471,500 Children to Lose Coverage
The Quarterly Status Reporting (QSR) proposal would force families to effectively renew their Medi-Cal coverage every three months, rather than the current annual renewal. In effect, the proposal would bury children and families in enough paperwork so those who can’t keep up are dropped from coverage, and therefore the state would no longer have to pay to cover them. This would put California at the bottom of state efforts to streamline enrollment for children and is antithetical to the shared goal of covering all children. According to state Administration estimates, the QSR proposal will result in 157,400 children losing MediCal coverage in FY 08/09, a cumulative total of 286,600 children will lose coverage through FY 09/10, and a total of 471,500 children will lose coverage over time.
April 2008
Currently, children renew their Medi-Cal coverage annually. This policy has been embraced almost universally across the nation as an effective way to keep children covered and to operate an efficient enrollment system. The excess bureaucracy associated with QSRs would significantly increase the already over-burdened state administrative system, by multiplying the amount of paperwork that will need to be processed. While nearly all children tangled in the red tape would still qualify for health insurance, enrollment workers will not only have to process four times as many applications, they will also have to re-enroll children who were unnecessarily dropped from coverage. There is plentiful research that shows how harmful the QSR policy is to children’s coverage and to state taxpayers. Washington State moved from annual renewal to a 6-month reporting requirement in 2003. The switch caused an approximately 10% decline in child enrollment in just the first year; however, the majority of the children soon re-enrolled, as they were still qualified but were tangled in the additional red tape of frequent reporting requirements. 3 In addition, Washington’s administrative costs grew by $3.5 million as a result of its 2003 policy of imposing more frequent reviews and eliminating continuous eligibility. 4
Increased Premiums and Co-Payments for the Healthy Families Program Pricing Health Insurance and Health Care Out of Reach for Many Low-Income Children
The Governor’s budget would increase premiums by 78% for children in families between 151-200% of the federal poverty level, to a new monthly premium of $16 per child. For children in families between 201-250% of the poverty level, monthly premiums will increase 27% to $19 per child. 5 A large body of research shows that even modest increases in cost-sharing results in health insurance becoming unaffordable and children losing coverage. 6 In low-income populations, sharp enrollment declines are consistently observed when premiums are increased as a percentage of a family’s income. According to the Administration’s own estimates, these premium hikes would result in 60,000 to 70,000 children losing their health insurance. The budget also includes a proposed 50% increase in co-payments for non-preventive services to $7.50 for children above 150% FPL. Even fairly small co-payments lead to reductions in the use of needed health care services and medications. 7
Healthy Families Dental Benefit Cap Leaving Some Children Without Needed Dental Services
The Governor’s budget proposes a $1,000 annual limit on Healthy Families dental coverage for each child, which is estimated to affect 45,000 children enrolled in the program. This arbitrary limit is not related in any way to children’s oral health needs. Even at low dentist reimbursement rates, this limit can quickly be exceeded if the treatment plan includes restorative care (such as fillings). Poor oral health leads to missed school days and systemic health problems; over 500,000 California children missed school in the last year due to poor oral health. Conversely, investing in completely treating dental problems at an early age helps children stay healthy and succeed in school.
County Administrative Cuts Skimping on Essential Administrative Staff and Delaying Coverage for Children.
The Governor’s proposed 10% funding cut severely undermines the county administration of many of the public programs so vital to children’s health. Simultaneously, counties are being asked to implement significant additional paperwork such as QSRs and new federal requirements. These county administrative cuts translate into 1,051 fewer county eligibility workers to process applications thoroughly and quickly, respond to families’ questions, and resolve difficult cases, leading to delayed coverage for children and families.
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Provider and Plan Cuts in Medi-Cal and Healthy Families Jeopardizing Children’s Access to Health Care
The Governor’s budget proposes a 10% rate cut to most Medi-Cal providers and plans, and a 5% rate cut to Healthy Families plans. California already has one of the lowest Medi-Cal reimbursement rates in the nation. Only Louisiana spends less per Medicaid child than California – even without taking cost of living into consideration – due in part to extremely low provider reimbursement. 8 Cutting rates even more will further limit providers’ ability to treat Medi-Cal patients. These rate cuts would apply to California Children’s Services providers, who serve children with severe medical conditions requiring specialized care.
No Funding for Children’s Health County Outreach Grants Undercutting Programs to Enroll Eligible Children in Insurance
The highly successful outreach grants to counties – cut in both last year’s and this year’s budgets – would have funded local efforts to reach children currently eligible for, but not enrolled in, Medi-Cal and Healthy Families. An evaluation of the outreach program in Los Angeles County showed that outreach and enrollment efforts assisted tens of thousands of children to enroll in coverage. 9 By failing to reinstate these funds, local efforts supported by these grants will be permanently dismantled.
Some Good News – Implementing SB 437 Reforms Streamlining Coverage Enrollment and Renewal Processes
While the overall budget proposal is extremely harmful to children’s coverage, one bright spot is the inclusion of funding to implement the reforms in SB 437 (Escutia, 2006) streamlining enrollment and renewal processes for children’s health insurance programs. This is a wise investment in efficiency while increasing coverage for an estimated 94,000 California children.
California’s Legislators must reject these harmful budget proposals. The cuts would create inefficiency in government bureaucracy and put children’s coverage at risk. Rather than turning back the progress and sending more children to the ranks of the uninsured, the Legislature should finish the job of covering all children.
For more information, please contact Kelly Hardy at khardy@childrennow.org or 510-763-2444 x126.
The 100% Campaign, a collaborative effort of The Children’s Partnership, Children Now and Children's Defense Fund California, was created to ensure that all of California’s children obtain the health insurance they need to grow up strong and healthy. http://www.100percentcampaign.org/
Cousineau, Stevens, & Pickering, “Children’s Health Initiatives Have Helped Prevent Over 1,000 Unnecessary Child Hospitalizations Annually,” USC Center for Community Health Studies, December 2007. http://communityhealth.usc.edu/USC%20Center%20for%20Community%20Health%20Studies/Center%20for%20Community%20Health%20Studies%20at%20USC_ files/Preventable%20Hospitalizations%20Brief.%2012-7.pdf. 2 Cousineau, et al., “Preventable Hospitalizations Among Children in California Counties After Child Health Insurance Expansion Initiatives,” Medical Care, Vol. 46 (2008): 142–147. 3 Mancuso, et al, “Understanding the Children’s Medical Caseload Decline: Part II: What the Survey Findings Tell Us,” Washington State Department of Social and Health Services Research & Data Analysis Division, August 2005. http://www1.dshs.wa.gov/pdf/ms/rda/research/9/74b.pdf. 4 Summer & Mann, Instability of Public Health Insurance Coverage for Children and Their Families: Causes, Consequences, and Remedies (Washington DC: The Commonwealth Fund, June 2006) 9. 5 For a family of four, 150% of the poverty level is an annual income of $31,800 and 200% of the poverty level amounts to $42,400 annually. 6 See for example Ku & Wachino, “The Effect of Increased Cost-Sharing in Medicaid: A Summary of Research Findings,” Center of Budget and Policy Priorities, July 2005. www.cbpp.org/5-31-05health2.htm. 7 Artiga & O’Malley, “Increasing Premiums and Cost Sharing in Medicaid and SCHIP: Recent State Experiences,” Kaiser Family Foundation, May 2005. www.kff.org/medicaid/upload/Increasing-Premiums-and-Cost-Sharing-in-Medicaid-and-SCHIP-Recent-State-Experiences-Issue-Paper.pdf. 8 Kaiser Family Foundation State Health Facts, “Medicaid Payments Per Enrollee, FY 2004.” www.statehealthfacts.org. From Urban Institute and Kaiser Commission on Medicaid and the Uninsured estimates based on Medicaid Statistical Information System reports from the Centers for Medicare and Medicaid Services, 2007. 9 Cousineau, et al, “State Budget Cuts Threaten Efforts in Los Angeles County to Link Uninsured Children with Health Care,” USC Center for Community Health Studies, August 2007.
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